Xerox Lowers Full-Year Forecast as European Slump Takes Toll

Xerox Corp., best known for its office copiers and printers, cut its full-year profit target on Friday after reporting lower second-quarter results, bracing for continued tough economic conditions in Europe.

The company said it expects revenue to remain weak in its technology business, which includes document systems, supplies, technical services and financing of products. The company is transforming itself into a business services provider.

Xerox forecast 2012 earnings per share of $1.07 to $1.12, excluding special items. Previously it had aimed at $1.12 to $1.18, and analysts had estimated $1.11.

In the second quarter, the weak macroeconomic environment resulted in a 4 percent decline in technology revenue, excluding the effects of foreign exchange, the company said.

Companies such as Xerox and rival International Business Machines Corp., which generate a large part of their revenue outside the United States, have taken a hit because a weak euro and other foreign exchange headwinds translate into fewer dollars.

The warning on the third quarter reflected what the market had seen from other companies, said Shannon Cross of Cross Research.

"They held to their cash flow for the full year, which was good," she said, adding that she expects similar results from other office equipment companies such as Canon and Ricoh.

Last week, Lexmark warned of falling sales in Europe.

Xerox, based in Norwalk, Connecticut, is at pains to prove it has more to offer than just copiers and printers. It moved into business services with its purchase of Affiliated Computer Services Inc. for $5.5 billion in 2009, the company's biggest deal in its 106-year history.

It now derives more than half of its revenue from its services business, but investments in the business have pressured margins. Xerox has promised cost-cutting and operational improvement.

Revenue in the services unit was up 7 percent in the second quarter excluding the effect of foreign exchange.